If motorists thought electric vehicles were expensive, just wait until they have to insure them — especially after 2035 when 100% of new automobile sales are mandated to be zero emission by law.That’s the conclusion of a new report by Morningstar DBRS which says car buyers should expect to pay more to insure their Teslas and fancy battery-powered rides as more of them hit the road.“Insurers will also have to adjust their pricing models as more EV claims data are generated,” it said. “Repairs and replacement parts for EVs are very expensive, prompting some insurers to total damaged vehicles instead of attempting to repair them.”.Presently, the discrepancy between EVs and gasoline powered automobiles is negligible due to the fact that there simply aren’t many of them on the roads. As a percentage of sales, battery electric, hybrid and plug-in hybrids accounted for less than 3% of all car registrations in 2022, it noted.Since EVs are still relatively new to market, Canadian insurers don’t have enough historical claims data to accurately estimate lifecycle durability, maintenance and repair costs, the report said.But it stands to reason they’d cost more to insure simply because they’re more expensive to begin with.In countries such as the UK and the EU, where the uptake has been higher and faster, EV owners already face higher premium rates and, in some instances, denial of coverage as insurers adjust their pricing models. This trend could manifest in Canada over time, the report noted..That’s because the federal government last month mandated that all new vehicles sold in Canada must be emissions free by 2035, starting with a 20% jump by 2027.Even in the US, where there are more EVs in absolute terms, a growing body of claims data is pointing to higher repair costs due to fewer serviceable parts and a shortage of skilled technicians.A Financial Times analysis further stated that in 2023, the average cost of insurance in the UK increased by 72% compared with an increase of 29% for ICE vehicles. “This could be an early indicator of what is to come for Canadian car owners in the near future as EV adoption increases and claims begin to add up for insurers.”For Canadian EV drivers, a silver lining might be found in the highly regulated Canadian automobile insurance industry where provincial governments are responsible for the regulation of auto insurance policies, including the monitoring of claims handling and dispute resolution. .”We expect that auto insurance rates will trend upward over time as insurers generate more claims data for EVs and reflect that experience in their pricing,”Victor Adesanya, Morningstar VP of North American insurance ratings.Provincial regulators in Canada also review and approve requests made by insurers to increase rates before they can be implemented. Morningstar says this could help mitigate the impact of insurance rate increases on the finances of EV owners on renewal or when an EV is registered for the first time.“However, we expect that auto insurance rates will trend upward over time as insurers generate more claims data for EVs and reflect that experience in their pricing,” said Victor Adesanya, Morningstar’s vice president of North American insurance ratings.
